DUBAI, Oct 14 (Reuters) - Saudi Arabia’s stock market plunged on Sunday as investors worried about deteriorating relations with the international community after the disappearance of Saudi journalist Jamal Khashoggi.

After nearly two hours of trade the index was down 7.0 percent, its biggest drop since December 2014, when oil prices were crashing. Shares in the region’s biggest petrochemical producer, Saudi Basic Industries, tumbled 7.9 percent.

“It’s the political environment. The market is reacting negatively to sentiment around the Khashoggi case and the political noise around it,” said Salah Shamma, head of investment for the region at Franklin Templeton Emerging Markets Equity, a big global fund manager.

Shamma noted the fundamental situation of the Saudi economy had not so far been affected.

But regional traders said speculation the Khashoggi case might deter some inflows of foreign investment - and that a backlash in the U.S. Congress could lead to U.S. sanctions against some Saudi individuals - had triggered panic selling of stocks by some local investors.

“It seems that international accounts are punishing the Saudi exchange,” a regional broker added.

Khashoggi, a prominent critic of Riyadh and a U.S. resident, disappeared on Oct. 2 after visiting the Saudi consulate in Istanbul. Turkey believes he was deliberately killed inside the building and his body removed. Riyadh has dismissed the claims.

U.S. President Donald Trump said on Saturday there would be “severe punishment” for Saudi Arabia if it turned out that Khashoggi was killed in the consulate.

Media companies and some technology executives have pulled out of a major Saudi investment conference scheduled for next week in Riyadh because of growing outrage over the disappearance.

Other stock markets in the Gulf opened higher on Sunday but began falling as Riyadh plunged, with the Dubai index sinking 1.4 percent. (Reporting by Hadeel Al Sayegh, Katie Paul and David Barbuscia; Additonal reporting by Marwa Rashad; Writing by Andrew Tochia; Editing by Mark Potter)